FLIGHT International. 6 January 1972
A new deal for air cargo
The existing structure of air freight tariffs is out-dated, in the view of Munir Abu
Haidar, president and chairman of Trans Mediterranean Airways (TMA), the
Lebanese all-cargo airline. At the recent International Air Transport Association
annual general meeting in Honolulu he made some constructive proposals for a
radical overhaul of the system. His proposals would, he suggested, suit both the
scheduled airlines and their customers, and help to compete with charter cargo
carriers. Extracts from his paper are reproduced below.
THE MOST FUNDAMENTAL PROBLEM which today faces the scheduled airlines who are members of the Inter national Air Transport Association is the fact that
we have allowed ourselves to be overtaken by the changing
nature of our markets and the changing needs and expecta
tions of our customers. Perhaps I should add that the
lata community has tried, sometimes not unsuccessfully,
to follow and catch up with the requirements of our
changing markets.
There is hardly anything more important in the inter
action between airline and customers than the price
mechanism. The rate structure forms the common
denominator between the supply as well as the demand
functions. The rate structure is the instrument that pro
motes cargo on regular services, and the rate structure
is again the instrument of promoting economic air services
to both the public and the airlines, at present and for the
future.
The previous criteria, upon which the present cargo
rate structure was based, have changed so radically and
so quickly that a new rating philosophy is required which
is capable of accommodating the new requirements of the
markets and the economic viability of the air cargo
industry.
What kind of rate structure do we really need in our
changing markets? Before I go any further and describe
a modern cargo rate structure, I would like to examine
briefly the present rate structure and list what, in my
opinion, are its main weaknesses.
The original factors behind the present cargo rate
structure were: (1) Comparatively slow aircraft, with small
belly capacity; (2) High cost of operation of the aircraft
then used; (3) Very limited, if any, all-cargo regular flights;
(4) Comparatively limited international trade.
Given these conditions, it was only natural that the
industry ended up with, a rate structure that considered
45kg as a large volume of freight; and that silk night
gowns should pay more for their transport than empty
cotton bikinis. The industry was promoting air freight for
a small cargo capacity that was left unfilled by passenger
luggage and express mail.
In time, with the progress of aviation and with aircraft
bellies getting bigger, the rate structure was developed
to include general cargo rates with weightbreaks in many
areas, and without them in other areas; there were
thousands of specific commodity rates, pallet rates and
rebated rates for cargo in containers.
This rate structure is very complicated to say the least;
it is often very difficult for an airline expert, let alone a
shipper, to determine the rate applicable to a consignment.
The component parts of the rate structure do not supple
ment each other; on the contrary, they compete with each
other in many instances, such as the specific commodity
rates and the bulk unit load device system.
Specific commodities that were allocated very low rates,
to encourage their carriage by air and to supplement the
revenue derived from general cargo, have become the
main bulk of cargo carried, and have consequently
depressed yields to an uneconomic level.
The preparation, accounting and handling of thousands
of air waybills under this rate structure has increased the
airlines' accounting, administrative .and traffic costs out of
proportion to the revenue generated. The non-scheduled
operators have taken advantage of this inconsistent and
rigid structure to get away with the lucrative cost-saving
large-volume shipments.
The development in international trade, the size of all-
cargo aircraft, the increasing number of all-cargo scheduled
services and the advent of large below-deck capacities have
so radically changed the criteria behind the present rate
structure that a new philosophy is required. A new rate
structure should emanate from the present state of world
commerce and technology and be geared to, and cater for,
the future . development and promotion of regular and
economic air cargo.
Promoting traffic
The rate structure for the future should be based on, and
cater for, the following requirements: (1) To promote
carriage by air in the shipping patterns of international
trade, for both urgent and not-so-urgent freight; (2) To
promote large consignments of freight in order to fill the
increasing capacity of all-cargo services, to save on ground
handling and compete adequately with charter operators;
(3) To safeguard the interest of under-deck capacity on
conventional aircraft; (4) To promote adequately the large
under-deck cargo capacity of wide-bodied aircraft; (5) To
relate density to weight; (6) To simplify the rate structure
in order to save on administrative costs; and (7) To regulate
equitably the relationship between the industry and for
warding agents.
The theory that only urgent valuable cargo moves by
air should no longer apply, and the industry must make
every effort possible to ensure that it does not. The industry-
must, as a fundamental basis of its philosophy, cater for
and promote both urgent and less-urgent cargo.
The policy makers in the movement of cargo are really
interested in two factors in making their decision on the
means of transport to be used: the transport cost, and the
speed of delivery. Sea transport is invariably used for slow
speed and low cost. With varying speeds of delivery and
higher costs, a combination of sea, rail, truck or air is
used. There is no doubt that the cost of transport should
be directly related to the speed of delivery. The most
logical rate structure is, therefore, a rate structure in which
the speed of delivery is the first element in the cost.
As the airlines are interested in large volumes of freight
to fill all their big cargo-jet flights and large under-deck
capacity, it is again natural to include quantity as another
element in the rate structure.
These two requirements, speed and quantity, must
therefore form the focal points of a new rate structure.
If this logic is valid, and I am convinced it is, then the
procedure to follow is, first, to divide cargo into speed
categories, and I suggest three categories: express, regular
and stand-by.
The second step, obviously, would be to inject the volume
requirement, or weightbreaks, into each of these categories.
Two additional factors are of material importance and
should be given consideration in rate-making. As long
as density of cargo still affects the payload, on present-day
aircraft, an appropriate weight/volume ratio should be
established. The present ratio of 7m3 to a tonne should
be more reasonable.
The new rate should also recognise the cost-saving to
the airline of the "ready-for-carriage" cargo.
Bearing in mind these four criteria—speed, quantity,